credit risk in central bank's repo portfolios. In the model default times of counterparties and collateral issuers are …Central bank lending to commercial banks is typically collateralized which reduces central bank's credit risk exposure … to “double default events” when the counterparty and the issuer of the underlying collateral asset both default in a …

, resolving this credit spread puzzle requires credit-market investors, especially those in high-quality debt, to be more risk …

The underlying asset pool of collateral debt obligations (CDOs) simultaneously encompasses credit risk and market risk …. However, the standard CDO pricing model not only underestimates the risk to the asset pool due to a poor description of the … systematic sudden shocks on the asset pool. This paper studies the joint impact of interrelated market and credit risk factors on …

Looking at the valuation of a swap when funding costs and counterparty risk are neglected (i.e. when there is a unique … risk free discounting curve), it is natural to ask "What is the discounting curve of a swap in the presence of funding … costs, counterparty risk and/or collateralization?".In this note we try to give an answer to this question. The answer …

This paper uses a general equilibrium model with collateralized borrowing to show that increases in risk can have … ambiguous effects on leverage, loan margins, loan amounts, and asset prices. Increasing risk about future payoffs and endowments … can lead to riskier loans with larger balances and lower spreads even when lenders are risk-averse and borrowers can …

Through the lens of market participants' objective to minimize counterparty risk, we provide an explanation for the … of the benefits and potential pitfalls with respect to a single market participant's counterparty risk exposure when … elements can render central clearing harmful for a market participant's counterparty risk exposure regardless of the number of …

This paper analyses the risk and return of loans portfolios in a joint setting. I develop a model to obtain the … with a Value at Risk constraint. I also obtain closed form expressions for the interest rates that banks should set in … compensation for borrowers' credit risk under absence of arbitrage opportunities and I use these rates as a benchmark to interpret …

Keeping in view that the roles of portfolio risk and the relationship between different risky lending assets in loan … valuation have not been studied empirically, this study examines the relationship between undiversiable portfolio risk and … portfolio lending with an attempt to fill the gap between the concept of portfolio risk diversification and the practice of …

products break down. So, we provide an estimation of the basis risk that arises when hedging credit portfolios with different … credit indices, to answer the following questions: Is there enough diversification of risk in a global credit portfolio to … allow for a good hedge? Is basis risk higher in North America than in Europe? Does the effectiveness of the hedge increase …